[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





 
                    THE BUREAU OF CONSUMER FINANCIAL


                  PROTECTION'S UNCONSTITUTIONAL DESIGN

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT
                           AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 21, 2017

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 115-6
                            
                            
                            
                            
                            
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PETER T. KING, New York              MAXINE WATERS, California, Ranking 
EDWARD R. ROYCE, California              Member
FRANK D. LUCAS, Oklahoma             CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico            BRAD SHERMAN, California
BILL POSEY, Florida                  GREGORY W. MEEKS, New York
BLAINE LUETKEMEYER, Missouri         MICHAEL E. CAPUANO, Massachusetts
BILL HUIZENGA, Michigan              WM. LACY CLAY, Missouri
SEAN P. DUFFY, Wisconsin             STEPHEN F. LYNCH, Massachusetts
STEVE STIVERS, Ohio                  DAVID SCOTT, Georgia
RANDY HULTGREN, Illinois             AL GREEN, Texas
DENNIS A. ROSS, Florida              EMANUEL CLEAVER, Missouri
ROBERT PITTENGER, North Carolina     GWEN MOORE, Wisconsin
ANN WAGNER, Missouri                 KEITH ELLISON, Minnesota
ANDY BARR, Kentucky                  ED PERLMUTTER, Colorado
KEITH J. ROTHFUS, Pennsylvania       JAMES A. HIMES, Connecticut
LUKE MESSER, Indiana                 BILL FOSTER, Illinois
SCOTT TIPTON, Colorado               DANIEL T. KILDEE, Michigan
ROGER WILLIAMS, Texas                JOHN K. DELANEY, Maryland
BRUCE POLIQUIN, Maine                KYRSTEN SINEMA, Arizona
MIA LOVE, Utah                       JOYCE BEATTY, Ohio
FRENCH HILL, Arkansas                DENNY HECK, Washington
TOM EMMER, Minnesota                 JUAN VARGAS, California
LEE M. ZELDIN, New York              JOSH GOTTHEIMER, New Jersey
DAVID A. TROTT, Michigan             VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia            CHARLIE CRIST, Florida
ALEXANDER X. MOONEY, West Virginia   RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                  Kirsten Sutton Mork, Staff Director
              Subcommittee on Oversight and Investigations

                    ANN WAGNER, Missouri, Chairwoman

SCOTT TIPTON, Colorado, Vice         AL GREEN, Texas, Ranking Member
    Chairman                         KEITH ELLISON, Minnesota
PETER T. KING, New York              EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina   JOYCE BEATTY, Ohio
DENNIS A. ROSS, Florida              MICHAEL E. CAPUANO, Massachusetts
LUKE MESSER, Indiana                 GWEN MOORE, Wisconsin
LEE M. ZELDIN, New York              JOSH GOTTHEIMER, New Jersey
DAVID A. TROTT, Michigan             VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia            CHARLIE CRIST, Florida
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 21, 2017...............................................     1
Appendix:
    March 21, 2017...............................................    37

                               WITNESSES
                        Tuesday, March 21, 2017

Gorod, Brianne J., Chief Counsel, Constitution Accountability 
  Center.........................................................     9
Olson, Hon. Theodore B., Partner, Gibson, Dunn & Crutcher LLP....     4
Prakash, Saikrishna Bangalore, James Monroe Distinguished 
  Professor, University of Virginia School of Law................     6
White, Adam J., Research Fellow, the Hoover Institution..........     8

                                APPENDIX

Prepared statements:
    Gorod, Brianne J.............................................    38
    Olson, Hon. Theodore B.......................................    52
    Prakash, Saikrishna Bangalore................................    68
    White, Adam J................................................    81

              Additional Material Submitted for the Record

Wagner, Hon. Ann:
    Letter from the American Financial Services Association......    95
    Letter from the Consumer Bankers Association.................    96
Ellison, Hon. Keith:
    Slide entitled, ``CFPB Actions to Enforce the Real Estate 
      Settlement Procedures Act''................................   100
Green, Hon. Al:
    Written statement of Americans for Financial Reform..........   101
    Amicus Brief from PHH Corporation v. Consumer Financial 
      Protection Bureau..........................................   106
    Written statement of the Center for American Progress........   128
Waters, Hon. Maxine:
    Letter from Consumers Union..................................   131


                         THE BUREAU OF CONSUMER



                         FINANCIAL PROTECTION'S



                        UNCONSTITUTIONAL DESIGN

                              ----------                              


                        Tuesday, March 21, 2017

             U.S. House of Representatives,
                          Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:08 a.m., in 
room 2128, Hon. Ann Wagner [chairwoman of the subcommittee] 
presiding.
    Members present: Representatives Wagner, Tipton, Ross, 
Messer, Zeldin, Trott, Loudermilk, Kustoff, Tenney, 
Hollingsworth; Green, Ellison, Cleaver, Beatty, Capuano, 
Gottheimer, and Gonzalez.
    Ex officio present: Representatives Hensarling and Waters.
    Chairwoman Wagner. The Subcommittee on Oversight and 
Investigations will come to order. Welcome. This is my very 
first time chairing the Subcommittee on Oversight. We are going 
to have--Ranking Member Green and I have just spoken. Many of 
our members are still in conferences. The President of the 
United States is speaking to our conference at the moment, so 
folks are going to be a little tardy in streaming in, but we 
want to get started on your testimony. And many have already 
seen your written testimony as you have submitted it.
    So today's hearing is entitled, ``The Bureau of Consumer 
Financial Protection's Unconstitutional Design.''
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    The Chair now recognizes herself for 4 minutes for an 
opening statement.
    For the past 8 years, the American people, under the Obama 
Administration, have grown complacent with the unchecked power 
emanating from Washington and its complete disregard for the 
Constitution. From health care to energy to financial services, 
Washington has worked to plan every aspect of your life and 
decide what is best for you.
    Now, more than ever, we have a new obligation to examine 
the checks and balances of our Federal Government, and ensure 
that our Constitution is reflected by it. It is time to bring 
accountability back to Washington for we, the people.
    Nothing embodies the Washington-knows-best mindset more 
than the Consumer Financial Protection Bureau (CFPB), by 
removing choices and making access to financial products more 
difficult under the guise of consumer protection. Since the 
creation of the CFPB, we have seen regulations that make it 
more difficult for consumers to qualify for a mortgage, obtain 
an auto loan, and access forms of credit. The superseding 
independence of the Bureau has demonstrated how a lack of 
checks and balances can lead to abuse.
    In the majority opinion of a case last October, a Federal 
judge ruled that, ``The Director of the CFPB is the single most 
powerful official in the entire U.S. Government other than the 
President.''
    As a result of a lack of safeguards, we have seen examples 
of widespread discrimination within the CFPB itself under 
Director Cordray's tenure, to which this committee has held 
five hearings itself. Additionally, without the ability of 
Congress and the Executive Branch to carry out proper 
oversight, the CFPB has become arrogant in its cloak of 
unaccountability by pursuing policy and regulating entities 
outside of its authorized scope, to the detriment of consumers.
    Without proper checks and balances, the natural tendency of 
government is always to continue expanding its power and reach, 
and the CFPB has been a perfect example. The CFPB is 
unaccountable to Congress in that it does not rely upon 
Congress for funding; instead, taking its funding stream from 
the Federal Reserve, to be allotted by the CFPB Director with 
no review from Congress. As a result, the CFPB has grown 
comfortable in repeatedly ignoring oversight requests made by 
this committee, including for subpoenaed records.
    Additionally, the CFPB is unaccountable to the President as 
well as by being headed by a single Director who can only be 
removed for cause rather than at will. The Constitution vests 
the executive power in an elected President of the United 
States of America, and not in various unelected agency and 
bureau heads.
    Lastly, the CFPB is unaccountable to the Judiciary, as the 
Dodd-Frank Act mandated, that courts give extra deference to 
the CFPB statutory interpretations, even if they are not 
granted exclusive interpretive authority. In this way, the CFPB 
can reinterpret consumer laws that are already on the books 
with established case law, and have been regulated by other 
agencies for years.
    Today, we will be examining the unconstitutional structure 
of the CFPB and how it has yielded unaccountability to Congress 
and the Executive Branch. Additionally, we will look at ways 
that the CFPB can be restructured in order to make the Bureau 
constitutional, as well as more accountable to Congress and the 
executive.
    Finally, we will be looking at what authority the President 
currently has to remove the CFPB Director, even before the 
resolution of ongoing litigation.
    I now recognize the gentleman from Texas, my good friend 
and colleague, Mr. Green, the ranking member of the 
subcommittee, for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    Madam Chair, speaking of power, I would like to, this 
morning, apologize to the American people for this shameful and 
disrespectful abuse of power. The Republicans are abusing their 
power by taking one side in the piece of litigation that is 
presently pending in a Federal Court right here in Washington, 
D.C. They are taking one side, the side of a mortgage company 
that has been accused of ripping off Americans, taking one side 
today, taking one side by allowing Mr. Olson to testify and 
present evidence and issues that will benefit his client. One 
side.
    Wouldn't it be great if every lawyer could have his 
client's case presented to the Congress of the United States of 
America? I suppose we have to ask ourselves, is this something 
that we will do in the future for every lawyer who has a case 
pending? Or is this simply a special congressional fix for Mr. 
Olson's client?
    One side. It is a shameful and disgraceful circumstance 
that we find ourselves dealing with today. And I am confident 
that Mr. Olson will indicate in his testimony, because I have a 
copy of it, that the views he will express will not necessarily 
be those of his firm or his client. Note the operative words, 
``not necessarily,'' meaning maybe, maybe not, the views of his 
client. However, over on page 10 of his testimony, Mr. Olson 
cites his client's case and gives commentary about his client's 
case. One side, the side of a mortgage company accused of 
ripping off the American people.
    Mr. Olson made this argument, or a similar argument, some 
39 years ago in Morrison v. Olson, a case that he is intimately 
familiar with, because in that case, Morrison v. Olson, the 
``Olson'' is Mr. Ted Olson, who is testifying before Congress 
today. In that case, Morrison v. Olson, a special prosecutor 
was appointed to investigate Mr. Olson for lying to Congress 39 
years ago. Mr. Olson has made this argument before. But now, to 
be fair to Mr. Olson, he was never proven to have lied to 
Congress. But 39 years ago, he made similar arguments and lost 
the case before the United States Supreme Court seven to one.
    Mr. Olson cites this case, which is why I bring it to your 
attention, Morrison v. Olson. Check page 10 of his testimony 
for those who desire to, and you will see where he brings the 
present case that is pending, the PHH case, before the 
Congress. The Morrison case he cites multiple times. The first, 
I believe, is on page 3. That would be in footnote number 2.
    This is a disgrace. The Congress of the United States of 
America should not be in the business of promoting litigation. 
It is disrespectful to the Judiciary of the United States of 
America for the Congress to do this. We ought to be about the 
business of deciding whether or not we are going to go forward 
with legislation.
    It is pretty obvious that Mr. Olson's clients--or client, 
in this case, the PHH client, the mortgage company--will 
benefit from this testimony today, because you are going to 
find one side, my Republican colleagues, in support of that 
case. They won't say it. They will just support the arguments 
that are being made and the arguments that will be put forth, 
similar to the arguments that were brought before the court 39 
years ago by Mr. Olson.
    I thank you for the time and I yield back.
    Chairwoman Wagner. The Chair now recognizes the Vice Chair 
of the subcommittee, the gentleman from Colorado, Mr. Tipton, 
for 1 minute for an opening statement.
    Mr. Tipton. Thank you, Madam Chairwoman. And thank you for 
holding this hearing today on the CFPB's unconstitutional 
structure.
    After 6 years of the CFPB's existence, we are seeing 
negative repercussions that have stemmed from the agency's 
decision-making. Therefore, it is important that we discuss how 
the Bureau's design allowed it to be wholly unaccountable to 
Congress. The independence of the CFPB from both the President 
and Congress has incentivized the Bureau to act with impunity, 
while it consolidates supervisory and regulatory authority.
    According to the unified agenda of its Federal regulations, 
the CFPB has finalized over 50 rules; and just half of these 
finalized rules have created $2.8 billion in cost and 17 
million hours of paperwork. Surprisingly, these new burdens 
were created without cost-benefit analysis or a study of the 
cumulative impact of the new requirements, and the impact that 
they would have on financial institutions or the businesses 
that depend on access to capital for survival.
    Under the guise of consumer protection, the Bureau has 
expanded its regulatory net to capture industries that are 
outside of its jurisdiction. It has favored enforcement actions 
over rulemaking. It has utilized questionable data collection 
and analysis to support an agenda driven by ideology instead of 
fact.
    Fundamental changes are needed to steer the CFPB back to 
its original mandate. The current regulatory regime has created 
a too-small-to-succeed atmosphere for those most in need of 
assistance, whether it be a community bank, Main Street 
business or credit union seeking a family to watch over.
    Chairwoman Wagner. The gentleman's time has expired.
    Mr. Tipton. I appreciate you holding this hearing, and I 
look forward to the commentary.
    Chairwoman Wagner. I now have the pleasure of welcoming our 
witnesses. Mr. Ted Olson, the Honorable Ted Olson, is currently 
a partner at Gibson Dunn serving as lead counsel on the PHH v. 
CFPB  case. Mr. Olson previously was Solicitor General of the 
United States as well as Assistant Attorney General in charge 
of the Office of Legal Counsel at the U.S. Department of 
Justice.
    Mr. Olson, you are recognized for 5 minutes.

STATEMENT OF THE HONORABLE THEODORE B. OLSON, PARTNER, GIBSON, 
                      DUNN & CRUTCHER LLP

    Mr. Olson. Thank you, Chairwoman Wagner, Ranking Member 
Green, and members of the subcommittee.
    I am grateful for the opportunity to address the important 
question of the constitutionality of the CFPB's structure. The 
views that I express are my own, and not necessarily those of 
my firm or any client of my firm.
    The Framers of the Constitution agreed that the 
accumulation of legislative, executive, and judicial power in 
the same hands is, in the words of the Framers, the very 
definition of tyranny. That principle animated their 
thoughtful, considered, and thoroughly debated decision to 
structure a government of carefully separated powers, with 
elaborate checks and balances. That structure has lasted for 
230 years, far longer than any governmental structure in 
history, and has delivered to the people of this country, the 
American people, a prosperous, strong, and free society, which 
is, and has been, the envy of the world. However tempting it 
might be to invent new and complex government structures in the 
interest of accomplishing some presumed efficiency or 
independence, we abandon the carefully calibrated structure of 
our Constitution at our peril.
    My testimony today will explain how the CFPB's structure 
violates the Constitution's separation of powers, turning to 
first, bedrock constitutional principles; second, to the CFPB's 
structure; and third, to the ways in which we might consider, 
as Americans, approaches to cure that structure.
    It bears emphasis that the Constitution's separation-of-
powers principles are a constitutional imperative, not a matter 
of aesthetics. The Constitution expressly divides the 
government's powers into three separate categories: 
legislative; executive; and judicial, and it assigns these 
powers to three branches of government in what are called the 
vesting clauses, the first three Articles of the Constitution. 
This structure, carefully explained by James Madison in 
Federalist Papers 47 and 48, was calculated to divide authority 
and, thus, protect liberty, but also to focus responsibility, 
transparency, and accountability.
    All executive power is vested in the President of the 
United States. The Framers of the Constitution openly debated, 
in June of 1787, whether or not the executive power should be 
invested in a multiple or an individual unitary President. They 
voted, after extensive debate, in favor of a unitary 
presidency, to vest executive power in the President alone and 
to vest the President with the responsibility to faithfully 
execute the laws of the United States.
    From the founding, the Constitution has been understood to 
empower and, indeed, require the President to maintain 
responsibility over Executive Branch subordinates through the 
power of removal. This removal power enables the President to 
ensure that the laws are faithfully executed. If the President 
fails to do that, he loses responsibility over the execution of 
powers.
    Now, to be sure, the Supreme Court has recognized 
exceptions in certain agencies, multiple-person agencies with 
limited powers, and in the case that was mentioned by Ranking 
Member Green, Morrison v. Olson,  which involved a temporary 
limited allocation of power to a single individual. But those 
lines of authorities have been criticized by the Supreme Court, 
and scholars in recent cases have questioned their validity.
    The CFPB's structure is the product of aggregating some of 
the most democratically unaccountable and power-centralizing 
features of the Federal Government's administrative state. The 
President is prevented from removing the head of the Bureau, 
except for very limited circumstances, and therefore, the 
President was stripped of the power to faithfully execute the 
laws in these circumstances.
    We have identified in our written testimony all of the 
other ways in which power is concentrated in the CFPB, without 
accountability to Congress over the budget, or to the President 
in connection with the removal power. The Director's hiring 
decisions are unchecked. None of his subordinates need the 
consent of the Senate to be appointed. The Bureau is striking 
in its unaccountability to Congress.
    Given the CFPB's lack of democratic accountability, it has, 
not surprisingly, during its brief existence rendered decisions 
that are sweeping in scope and arbitrary and capricious in 
substance.
    I realize that my time has expired, and I can stop at this 
point if that is appropriate.
    [The prepared statement of Mr. Olson can be found on page 
52 of the appendix.]
    Chairwoman Wagner. The witness' time has expired, and I am 
sure we will be able to proceed during some of the questioning 
with some of your other points. We thank you for your written 
testimony, and without objection, all of the witnesses' written 
statements will be made a part of the hearing record.
    Mr. Olson. Thank you, Chairwoman Wagner.
    Chairwoman Wagner. And I appreciate your testimony.
    Our next witness is Professor Saikrishna Prakash, a 
professor at UVA Law, focusing on separation of powers, 
particularly executive powers. Mr. Prakash previously has 
clerked on the U.S. Court of Appeals for the D.C. Circuit and 
for the U.S. Supreme Court, and has additionally served as 
Associate General Counsel at OMB.
    Mr. Prakash, you are now recognized for 5 minutes.

    STATEMENT OF SAIKRISHNA BANGALORE PRAKASH, JAMES MONROE 
 DISTINGUISHED PROFESSOR, UNIVERSITY OF VIRGINIA SCHOOL OF LAW

    Mr. Prakash. Thank you, Chairwoman Wagner and Ranking 
Member Green, and thank you, members of the Financial Services 
Committee, for inviting me here today.
    I have been studying questions of separation of power for 
about 2 decades now, and I have written various articles on 
removal and a book on the original Presidency.
    Let me start off with some basic principles. The 
Constitution vests the executive power with the President. It 
requires that he take care that the laws are faithfully 
executed. These are principles understood by all, but what does 
that mean? It means that the executive power, which is the 
power to execute the laws, rests with the President; just like 
the judicial power, the power to decide cases, rests with 
judges; and just like the legislative power, the power to make 
laws, rests with Congress.
    From the beginning, this principle was understood. The 
first Congress created several departments. Each of those 
departments reflected the principle that the Constitution 
itself made the President the constitutional executor of the 
laws, and that others that were created by Congress to help him 
execute the laws were his subordinates and assistants. And that 
is why those first three statutes, the statutes that created 
the Department of Foreign Affairs, the Department of the 
Treasury, and the Department of War--people were less 
politically correct back then--the Department of War, those 
three statutes all assume that the President had a power to 
remove. And James Madison famously explained why. He said, ``If 
any power is executive, it has to be the power to supervise, 
direct, and remove executive officers.'' And from that time on, 
it has been understood that the removal is an executive power.
    President Washington issued hundreds of commissions, each 
of which noted that the officer served at the pleasure of the 
President. He removed dozens of officials. He did all these 
things without any statutory warrant. There was no statute that 
ever said that the President could remove; and there was no 
statute that ever imposed a for-cause restriction until the 
Civil War.
    Things changed during the Civil War, because Congress was 
deeply unsatisfied with Andrew Johnson's Administration of the 
South, and Congress put, for the first time, a for-cause 
restriction in the statutes. And ever since then, questions 
about limitations on the President's power to remove have 
occasionally wandered into the courts. The courts haven't 
exactly shined in this area. There are more zigzags in the 
court's jurisprudence than on the slalom course. The court has 
never stuck with one position. Myers v. United States is a case 
that suggested the President has an unlimitable power to remove 
with respect to people appointed with the advice and consent of 
the Senate. That was decided by Chief Justice Taft, the only 
member of the court to have been President prior to serving on 
the court.
    But about 9 years later, during the New Deal, at a time 
when people were quite apprehensive about Presidential power, 
the court did a 180-degree turn on President Roosevelt (FDR), 
much to his astonishment, and they decided that the President 
needed to abide by a statute that said he needed cause to 
remove a Commissioner of the FTC.
    FDR was shocked. His advisors were shocked. And several 
members of the court that were part of the Myers majority had 
flipped. And I think it was part of a context where members of 
the Supreme Court were deeply concerned about the amount of 
authority being given by Congress to the Executive Branch and 
by the authority being exercised by the Executive Branch.
    Since Myers and since Humphrey's, the court has just not 
been very clear about the removal authority. In the most recent 
case, Free Enterprise Fund, decided several years ago, the 
court went out of its way to strike down the statute. It 
assumed that the SEC Commissioners in the case had for-cause 
removal protections, then used that fact to strike down the 
for-cause protections for the PCAOB. Essentially, the court 
went out of its way to strike down the statute. And they made 
it clear that they weren't saying that Humphrey's Executor and 
Morrison v. Olson  were still good law. They made a point of 
saying that the litigants haven't asked us to reconsider those 
statutes or those cases. I think there are four votes on the 
court right now to overturn Morrison and/or Humphrey's. There 
could very well be a fourth, a fifth, depending upon what 
happens to Mr. Gorsuch.
    I will end by saying, if the statute is constitutional, 
there is nothing that prevents Congress from amalgamating all 
administrative power across all agencies and giving it to Mr. 
Cordray, or to Mr. Deregulator, or whomever you want, and 
telling that person, you now are responsible for all these 
decisions, because there is no logical stopping point to the 
statute.
    Thank you so much.
    [The prepared statement of Mr. Prakash can be found on page 
68 of the appendix.]
    Chairwoman Wagner. I thank the witness for his testimony.
    Next, we will move on to Mr. Adam White. Mr. White is a 
research fellow at the Hoover Institution, writing on the 
courts and the administrative state. Prior to that, he was an 
adjunct fellow at the Manhattan Institute, and he also 
practiced law with Boyden Gray & Associates, writing briefs on 
constitutional and regulatory issues.
    Welcome, Mr. White. I look forward to your testimony.

    STATEMENT OF ADAM J. WHITE, RESEARCH FELLOW, THE HOOVER 
                          INSTITUTION

    Mr. White. Thank you.
    Chairwoman Wagner, Ranking Member Green, Financial Services 
Committee Chairman Hensarling, and members of this committee, 
thank you for the opportunity to testify.
    The CFPB's structure is one of the most important 
constitutional issues facing Congress today. When you debate 
the CFPB's structure, you are debating the structure of the 
21st Century administrative state in general. For nearly a 
century, our administrative state was defined by the structural 
decisions made by Congress from 1887 to 1914--that is, from the 
creation of the Interstate Commerce Commission, to the creation 
of the Federal Trade Commission. Those legislative precedents, 
and the judicial precedents that followed, became the benchmark 
for decades and decades that followed. When Congressmen, 
Presidents, judges, and lawyers debated the administrative 
state in the 20th Century, they debated within the lines drawn 
by Congress decades earlier.
    The Dodd-Frank Act radically changed that paradigm by 
creating new forms of structural unaccountability. If Congress 
or the courts do not reform the CFPB structure, then that 
agency's structure will become the benchmark, the paradigm, for 
decades to come. The next time someone proposes a new 
independent agency, they won't model it on the Consumer Product 
Safety Commission; they will model it on the CFPB. In fact, we 
saw in 2010 and 2013, the Chair of the SEC and the Chair of the 
CFTC calling for new funding structures to resemble the CFPB's 
new structure.
    The CFPB's unconstitutionality has been self-evident since 
the moment it was created. Boyden Gray, my old boss, and John 
Shu, raised these issues in a Federalist Society White Paper 
soon after Dodd-Frank was enacted. And in 2012, Boyden and his 
colleagues, including me, filed the first constitutional 
lawsuit challenging the CFPB. For 6 years, the CFPB's 
unconstitutionality has been highlighted in Congress, in legal 
scholarship, and now, by the D.C. Circuit's three-judge panel 
in the PHH case.
    But as Justice Holmes once wrote, a page of history is 
worth a volume of logic. The best evidence of the CFPB's 
structural unconstitutionality is found in the CFPB's own 
conduct: its lavish spending; its haphazard approach to 
lawmaking; its refusal to take seriously the allegations of 
racial discrimination in personnel decisions; its aggressive 
collection of personal financial data; and its unapologetic 
defiance of Congress, especially of this subcommittee. All of 
those pages of history are symptoms of the CFPB's unprecedented 
lack of accountability to Congress and to the President.
    Given the recent change in Presidential Administrations, it 
is natural to focus on the CFPB's measure of independence from 
the President. But I would urge you to focus, first and 
foremost, on the CFPB's independence from Congress, especially 
its independence from your power of the purse. As James Madison 
observed in Federalist 58, this power of the purse may, in 
fact, be regarded as the most complete and effectual weapon 
with which any Constitution can arm the immediate 
representatives of the people, for obtaining a redress of every 
grievance, and for carrying into effect every just and salutary 
measure. Madison added that the power of the purse would be 
Congress' best shield against ``all the overgrown prerogatives 
of the other branches of the government.'' When the 111th 
Congress gave away your power of the purse, it abdicated your 
constitutional responsibilities, with all due respect.
    So long as the CFPB is able to fund itself by calling up 
the Federal Reserve and demanding its annual $600 million 
entitlement, the agency will never take seriously any limits 
placed upon it by Congress. Please do not wait for the courts 
to fix Dodd-Frank, especially with respect to your power of the 
purse. As Justice Jackson warned in the Steel Seizure case, in 
the end, ``only Congress itself can prevent power from slipping 
through its fingers.''
    Thank you.
    [The prepared statement of Mr. White can be found on page 
81 of the appendix.]
    Chairwoman Wagner. Thank you for your testimony. Our next 
witness is Ms. Brianne Gorod. Ms. Gorod is the chief counsel at 
the Constitution Accountability Center. Ms. Gorod previously 
served in private practice as counsel for her firm's Supreme 
Court and appellate practice. Prior to that, she was an 
attorney adviser in the Office of Legal Counsel at the U.S. 
Department of Justice, and served as a law clerk on the Supreme 
Court.
    Welcome, Ms. Gorod. We look forward to your testimony.

  STATEMENT OF BRIANNE J. GOROD, CHIEF COUNSEL, CONSTITUTION 
                     ACCOUNTABILITY CENTER

    Ms. Gorod. Thank you, Chairwoman Wagner, Ranking Member 
Green, and members of the subcommittee.
    I would like to thank the subcommittee for inviting me to 
assist its members and their colleagues in considering the 
constitutionality of the Consumer Financial Protection Bureau, 
which Congress created in 2010 in the wake of the devastating 
financial crisis of 2008.
    After months of evaluating the roots of the financial 
crisis and assessing the types of reforms needed, lawmakers 
concluded that a major culprit was the failure of a fragmented 
and unaccountable consumer financial protection regime to 
safeguard homeowners from reckless financial products. To 
remedy this failure, Congress established the CFPB, a bureau 
that would have the independence, the resources, and the 
mission focus necessary to prevent a recurrence of those 
problems and respond to the challenges of an evolving financial 
marketplace. Since its inception, the CFPB has been incredibly 
successful in achieving its aims of protecting consumers and 
overseeing the financial sector.
    Despite, or perhaps because of the CFPB's incredible 
successes, it has come under repeated attacks, including claims 
by its opponents that it is unconstitutional. In my remarks 
this morning, I am going to explain why these arguments are all 
wholly without merit.
    First, the CFPB's leadership structure, namely, the fact 
that it is led by a single Director removable only for cause, 
is consistent with the text and history of the Constitution as 
well as Supreme Court precedent.
    We have already heard a lot this morning about the fact 
that we have a single President. That is true enough. But that 
doesn't answer the question of whether the President must have 
unlimited removal power over all officers, no matter their 
character and their functions.
    In drafting the Constitution, the Framers gave Congress 
considerable flexibility in determining how to shape the 
Federal Government. Consistent with that constitutional design, 
the Supreme Court held over 80 years ago that Congress may 
choose to shield the heads of independent regulatory agencies 
from Presidential removal at will. In that case, the Court 
upheld a removal provision identical to the one governing the 
CFPB Director.
    The Supreme Court has repeatedly reaffirmed that principle 
in the years since, including as recently as 6 years ago, in an 
opinion by Chief Justice John Roberts. That precedent should be 
the end of the discussion. But CFPB opponents argue that this 
clear-cut precedent doesn't matter, because the CFPB is headed 
by a single Director rather than a multi-member commission. But 
that is a distinction without a difference. Indeed, that 
distinction was not the basis for the Supreme Court decision.
    The question under Supreme Court case law is whether the 
removal provision impedes the President's ability to perform 
his constitutional duty. And no plausible argument can be made 
that leadership by a multi-member body would enhance the 
President's ability to ensure faithful execution of the laws.
    Quite the opposite. If the Bureau's leadership structure 
had any significance to the constitutional question, this 
factor would weigh in favor of a single Director because a 
multi-member board serving staggered terms is, if anything, 
less accountable to the President. The fact is, in the context 
of the CFPB, the removal provision does not impede the 
President's ability to faithfully execute the laws, because if 
he determines the Director is abusing his office or committing 
a breach of faith, the President may hold the Director 
accountable by removing him, and that is all the Constitution 
requires.
    Second, there is no constitutional prohibition on the CFPB 
being funded outside the congressional appropriations process. 
Indeed, the CFPB is hardly alone in this. All but two of the 
Federal financial regulatory agencies are funded outside the 
congressional appropriations process.
    Opponents of the Bureau argue that its independent funding 
is prohibited by the appropriations clause, which provides that 
no money shall be drawn from the Treasury, but in consequence 
of appropriations made by law. But that clause is exactly what 
it seems, simply a limit on withdrawing money from the Federal 
Treasury. Because the Bureau's funding doesn't come from the 
Federal Treasury, that clause is simply irrelevant. And there 
is no other provision of the Constitution which prohibits 
Congress from enacting funding structures for agencies that 
defer from the procedures prescribed by the ordinary 
appropriations process. It also bears emphasis that Congress 
remains free to alter the CFPB's funding structure at any time.
    Finally, Bureau opponents have argued that it is not only 
unconstitutional, but also unaccountable, because, in their 
view, its powers are unprecedented and unlimited. This, too, is 
wrong. Leadership by a single director is a common feature 
among agencies, and independent funding is the norm for 
financial regulators. The Bureau is not the first agency to 
combine those two features. The Bureau's powers are also hardly 
unchecked. It is subject to an array of requirements and 
procedural checks, and it shares regulatory enforcement 
authority with other regulators.
    In sum, the CFPB opponents' claims are wrong. The Bureau is 
clearly constitutional, and it is accountable, and it should be 
allowed to continue doing the important work of protecting 
American consumers.
    Thank you.
    [The prepared statement of Ms. Gorod can be found on page 
38 of the appendix.]
    Chairwoman Wagner. I thank our witnesses for their 
testimony, and without objection, the witnesses' entire written 
statements will be made a part of the record.
    The Chair now recognizes herself for 5 minutes for 
questioning.
    When I took an oath of office for my seat in Congress, I 
swore to support and uphold the Constitution, alongside the 
rest of my fellow Members of Congress. Just before Donald Trump 
assumed the office of the President, he similarly swore to 
preserve and protect and defend the Constitution. I take that 
oath very seriously, and I believe the President does as well.
    While we are holding a hearing and contemplating 
legislation to identify and discuss how Congress should remedy 
and restructure the issues that plague the CFPB, I believe the 
President can also play a role and has an identical 
responsibility to protect the Constitution and correct defects.
    Mr. Olson, what are some of the things that you think the 
President can do to fix the Bureau's structure in order to 
uphold his constitutional obligation?
    Mr. Olson. In my judgment, Chairwoman Wagner, the President 
has the constitutional authority to remove the Director of the 
Bureau, notwithstanding the limitations that are imposed in the 
statute. We believe that those limitations are 
unconstitutional, and that they strip the President of the 
power to execute the laws.
    If the entire administrative agency that this statute 
creates can act without direction of the President and 
completely separated from the President, the execution of those 
19 broad-based statutes is out of the hands of the executive 
created by the Constitution to enforce the law. Therefore, I 
believe that the President has the power to remove that 
individual in order to faithfully execute the laws.
    Chairwoman Wagner. Many seem to think that the push for the 
Director of the CFPB to be able to remove at will is an 
entirely partisan exercise, but we have seen many bipartisan 
examples in the past that supported the President's ability to 
decline to enforce unconstitutional statutes.
    The Clinton Administration, for instance, in the Office of 
Legal Counsel memos, stated that, ``There are circumstances in 
which the President may appropriately decline to enforce a 
statute that he views as unconstitutional, particularly to 
resist unconstitutional provisions that encroach upon the 
constitutional powers of the Presidency.''
    Mr. Olson, does the President's constitutional duty require 
him to abide by a statute he views as unconstitutional that 
encroaches upon the powers of the Presidency, such as being 
able to remove the CFPB Director?
    Mr. Olson. I believe the President has the responsibility 
to the Constitution, not to an unconstitutional statute. I 
served in the Office of Legal Counsel for nearly 4 years, 40-
some years ago, and I reviewed the opinions of the Office of 
Legal Counsel that preceded my tenure there, and I have 
reviewed opinions of the Office of Legal Counsel under other 
Presidents in the years after.
    The Office of Legal Counsel in the Justice Department 
repeatedly has opined that the President has the responsibility 
to protect the Constitution, and that is inclusive of 
protecting the prerogatives and authority of the Congress and 
the Executive Branch.
    Chairwoman Wagner. Thank you, Mr. Olson.
    Additionally, in 2012, regarding the ability of the 
President to remove the CFPB Director, Barney Frank said, ``No 
one doubts that if a change in administration comes and the new 
President disagrees with the existing Director, he or she can 
be removed. And proving that you were not inefficient, the 
burden of proof being on you, would be overwhelming.''
    Mr. Prakash, do you agree with Barney Frank, one of the 
chief authors of the Dodd-Frank Act which created the CFPB, on 
the ability of the President to remove the CFPB Director simply 
with a change in the Administration?
    Mr. Prakash. Thank you, Chairwoman Wagner. I do agree with 
Chairman Frank. I see his picture back there. I think the 
Supreme Court has never been clear about what cause requires. 
And sometimes, they have read that requirement very broadly, 
meaning the President has lots of authority to find cause; and 
other times, they have read it narrowly.
    But I also agree with Mr. Olson that, independent of that, 
the President has a constitutional duty to disregard statutes 
he believes are unconstitutional. That goes back to Thomas 
Jefferson and his refusal to enforce the Alien and Sedition 
Acts.
    Chairwoman Wagner. Thank you, Mr. Prakash.
    Quickly, Mr. White, does the President need to wait for the 
courts to strike down a law as unconstitutional before deciding 
whether to remove the Director?
    Mr. White. No, he doesn't, either under the statutory for-
cause requirements, or under his constitutional authority. He 
has a constitutional power and obligation to apply the 
Constitution.
    Chairwoman Wagner. Thank you. I see that my time has 
expired.
    And it is my pleasure now to recognize the gentleman from 
Minnesota, Mr. Ellison, for 5 minutes.
    Mr. Ellison. I would like to thank the Chair, and the 
ranking member, and all of our witnesses today.
    Disrupting realty cartels, taking action against captive 
reinsurance, stopping illegal kickbacks during home sales, that 
is what this case is about. PHH v. CFPB is a $109 million fine, 
the largest fine CFPB has ever levied against a firm, because 
of a kickback scheme. And, unfortunately, three witnesses here 
today are defending a kickbacker, which I think is shameful.
    Why does stopping these kickback schemes matter to the 
American people? Because it makes it harder for people to buy a 
home. We live in a country where we are proud of our great 
middle class. Part of that means being able to get a home. The 
behavior of PHH Corporation is directly oppositional to that 
effort, in order to try to extract more money.
    I am very concerned about the falling home ownership gap. I 
am also concerned that millennials and African-American home 
ownership rates are lower than usual. Part of the reason for 
low home ownership rates is the high cost of housing and the 
need to assemble enough money for a downpayment and closing 
costs. When people buy a home, they quickly find out there are 
many costs in addition to the price of the home. And if you are 
not paying cash, you will need title insurance for a lender, 
maybe title insurance for yourself. If you aren't putting down 
20 percent, you are going to need private mortgage insurance, 
maybe a homeowner's warranty.
    Of course, buyers are usually unfamiliar with these 
financial products. Unless you work in the industry, you 
probably never heard of them before you tried to buy that 
house. So home buyers rely on their REALTORS and lenders to 
refer them to trusted partners. But for too long and too often, 
some of these affiliations were really kickback schemes. And 
that is what three of our witnesses here are defending, really.
    There is a lot of high-floating rhetoric about the 
Constitution and so forth. This is because the CFPB is standing 
up for working people. That is it. This is the money versus the 
many, plain and simple.
    On the screen is a slide from the realty firms charged by 
the CFPB of illegal kickbacks. They are up there right now. You 
might ask, aren't kickbacks illegal? The answer is yes. There 
is a piece of legislation called RESPA, which prohibits a 
financial benefit for a referral. But for too long, that 
prohibition has not been enforced.
    Talking about things not being enforced, let's start there. 
So lower desk rents, commissions, event tickets, or cash were 
all provided to lenders, mortgage brokers, and real estate 
firms and agents based on how many clients they sent over.
    Are there any witnesses who feel that mortgage lenders, 
REALTORS and bankers should be allowed to receive a financial 
benefit for a referral? Raise your hand if you think a mortgage 
broker, bank, or REALTOR should be able to receive a financial 
benefit for a referral?
    I see no hands.
    Let's be clear. When borrowers are overcharged, it makes it 
more likely that they will default on their mortgage. As a 
Member of Congress, as a homeowner, and as a Member of Congress 
who represents homeowners, I don't want to see people 
overcharged, not when they buy their home, not when they use a 
bank, not when they get a prepaid card.
    Not only do I not want to see homeowners overcharged, I 
don't want to see companies, like title insurance companies, 
private mortgage insurance firms, et cetera, forced into costly 
controlled affiliations in order to stay in business. Title 
insurance and PMI companies should have the freedom to run 
their businesses as they wish without having to give a kickback 
for their referral base.
    That is the market CFPB the is creating, a more fair 
market, a better market for companies and people. And I know 
that the hearing today is a very real legal conversation about 
construction and funding for the CFPB, but I want the people 
watching this broadcast, if they are, to know that that is not 
really what this is about. This is about protecting a deeply 
vested, incredibly profitable industry. That is what is 
happening here. It is not about the Constitution; that is a 
subterfuge.
    Let's not lose focus about what the CFPB does. When 
financial firms rip you off, the CFPB gets your money back, and 
they need independence to do that. And that is what these three 
men are opposing, and that is what Ms. Gorod is standing up 
for.
    I yield back.
    Chairwoman Wagner. The gentleman yields back.
    The Chair now recognizes the Vice Chair of the Oversight 
and Investigations Subcommittee, the gentleman from Colorado, 
Mr. Tipton, for 5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman.
    Mr. Olson, I appreciated your comments in regards to 
separation of powers. Regarding the CFPB and funding decisions, 
is the Director subject to any review by the Federal Reserve?
    Mr. Olson. No.
    Mr. Tipton. Is the Director subject to any review by either 
of Congress' Committees on Appropriations?
    Mr. Olson. No, that is not my understanding.
    Mr. Tipton. Is the Director subject to any review by the 
Office of Management and Budget?
    Mr. Olson. No.
    Mr. Tipton. Is the Director subject to any review by the 
President?
    Mr. Olson. No.
    Mr. Tipton. Mr. Olson, perhaps you could describe for me, 
with the importance of separation of powers, where is the check 
and balance on the CFPB?
    Mr. Olson. That is the important part of what you are 
discussing here today. When agencies are created, the Framers 
of our Constitution vested the power to create laws in 
Congress; to enforce laws in the President; and to adjudicate 
whether those laws have been violated in the Judiciary.
    The Framers of the Constitution felt very strongly that if 
you accumulated all those powers--the powers to create laws, to 
enforce laws, and to adjudicate laws--in a single institution, 
that would be the very definition of tyranny. That is why there 
must be a check on the CFPB if you have that authority; for 
executive agencies, the President, is responsible to you and to 
the people with respect to the enforcement of those laws, and 
then the Judiciary comes in with respect to enforcement of 
those laws. If you break down that separation of powers, you 
lose the very valuable thing that was created in 1789 to 
protect us and protect our liberties.
    Mr. Tipton. Do you view that really as dangerous, to have 
an agency that is completely out of control of any authority by 
Congress, and, apparently, to a degree, even the President?
    Mr. Olson. It is very dangerous, because it is the very 
definition of tyranny, according to what the Framers of our 
Constitution describe, because you have to have accountability. 
And when you don't, when you have an agency that is not 
accountable to you with respect to appropriations, it is not 
accountable to the President with respect to the enforcement of 
policies, and then who can control that agency? No one can 
control that agency. The way this agency was structured, the 
President has no control whatsoever, and neither does Congress.
    Mr. Tipton. We had a question that had been raised offering 
you the opportunity to be able to raise your hand. Does anyone 
on our panel believe that we shouldn't have separation of 
powers, checks and balances, throughout our system?
    No hands are raised.
    We are seeing actually a fundamental agreement here that we 
need to be able to have checks and balances within our system. 
But when we are looking at the CFPB, we see an agency that is 
completely out of control of the Executive and the Legislative 
Branches.
    We focused a lot, actually, on the President's ability to 
be able to remove the Director with cause, which was never 
actually defined, but, Mr. Olson, does it raise additional 
constitutional questions in regards to the funding not being 
under control by Congress?
    Mr. Olson. It is an additional problem. The power of 
appropriations is the core of Congress' responsibility in 
addition to creating laws. And when you lose that power, you 
lose control over the agency, so you cannot do that.
    The statute also gives the CFPB--and it is in my written 
testimony--additional powers, freedom to hire and fire its 
employees without responsibility to other Federal laws, hiring 
subordinates without having them approved by the Senate, which 
other executive agencies have to do, and I could go on and on. 
It is in our written testimony. Everything that Congress has 
ever created to draw power away from the President and from 
Congress is aggregated in this agency. It has all been put 
together.
    Mr. Tipton. So would an appropriate response be for 
Congress to reclaim the power of the purse over the CFPB?
    Mr. Olson. Yes.
    Mr. Tipton. Thank you, Mr. Olson.
    I would like to be able to maybe talk to Mr. White for just 
a moment in regards to your testimony, getting back to some of 
our community issues as well. You mentioned that the biggest 
banks fare much better under the heightened compliance burdens 
created by the CFPB regulations.
    My rural district in Colorado is populated with Main Street 
institutions, community banks, and credit unions. In your 
experience, how well do these small institutions do under the 
same compliance obligations as larger institutions?
    Mr. White. I would say my experience is limited to my 
former co-representation of a west Texas community bank that 
challenged the constitutionality of Dodd-Frank. That litigation 
is still pending. I am no longer involved in it. I have seen 
how that bank and other small banks who can't afford armies of 
lawyers, lobbyists, and compliance officers struggle to 
shoulder the burdens of those costs.
    I do agree with what Governor Romney said in his 2012 
Presidential debate, that Dodd-Frank is the biggest kiss that 
Wall Street ever received from Washington in that respect.
    Mr. Tipton. Thank you.
    I yield back, Madam Chairwoman.
    Chairwoman Wagner. The gentleman yields back.
    It is now my pleasure to recognize my good friend, the 
gentleman from Missouri, Mr. Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. And thank you, 
Ranking Member Green.
    We hear a lot about government and so forth, what it should 
do. And sometimes I get the feeling that people are suggesting 
that civil liberties are better off without government. I am 
wondering, Mr. Olson, if you agree that the Constitution of the 
United States defines who counts? Do you agree with that, yes 
or no? The Constitution?
    Mr. Olson. I am not sure I heard the last part of that 
question.
    Mr. Cleaver. Who counts? In the Constitution--if you read 
the Constitution, do you come away with a better understanding 
that in the United States, based on this document, who counts?
    Mr. Olson. I am not understanding the question. I am not 
hearing that one word.
    Mr. Cleaver. Who counts?
    Mr. Olson. Ultimately, the people, of course, count. And 
the people have created a Constitution that separates powers 
and creates accountability. In Federalist 70, Alexander 
Hamilton talked about how it was important to focus executive 
power in an individual, the President--
    Mr. Cleaver. Okay. I am not going there.
    Mr. Olson. --so that the President could be accountable to 
the people.
    Mr. Cleaver. Thank you very kindly.
    Right at the beginning, all men are created equal. It 
starts telling us who counts. That may be more theology than 
political. But I think the Constitution--and I was in the 
Middle East, and a guy was telling me, I don't know why African 
Americans would be loyal to this country and so forth. I said, 
look, we have a document, and it defines who counts; and in 
this document, whether we have achieved it or not, I know that 
the Framers wanted everyone to count.
    So you agree with me, I think.
    Mr. Olson. I think I agree with you. I think that it is 
essential, and that the reason this Constitution has preserved 
our liberty in this country for so many years, is that the 
Framers of the Constitution thought very carefully about how to 
hold accountable and who counts--
    Mr. Cleaver. Okay.
    Mr. Olson. --and to vest authority in places where they 
could oversee it.
    Mr. Cleaver. Okay, thank you. On who counts, you agree with 
me.
    Do you agree, Mr. White, that the might of any republic is 
found in how it treats its vulnerable, yes or no? The might of 
any republic is found in how it treats its vulnerable?
    Mr. White. Yes, sir. And I think--
    Mr. Cleaver. Thank you very kindly. I appreciate it.
    Ms. Gorod, thank you for being here. Do you know anything 
about the Federal Trade Commission?
    Ms. Gorod. Just a little bit.
    Mr. Cleaver. Do you know who appoints the--we actually call 
them ambassadors, but who appoints the trade administrator?
    Ms. Gorod. I believe the President does.
    Mr. Cleaver. Yes.
    Mr. White, do you know who can remove the Federal Trade 
Commission?
    Mr. White. Yes, sir, the President.
    Mr. Cleaver. Thank you very kindly.
    Can you tell me who, Mr. White, can replace the Director of 
the CFPB?
    Mr. White. To the extent that he can be removed, he can be 
removed by the President.
    Mr. Cleaver. Thank you very kindly.
    You all have been so supportive of what I said today. I 
appreciate it very much.
    I yield back.
    Chairwoman Wagner. I thank the gentleman for his 
questioning. The gentleman yields back.
    The Chair now recognizes a new member of our committee, the 
gentleman from Indiana, Mr. Hollingsworth, for 5 minutes.
    Mr. Hollingsworth. Good morning. And thanks, everybody, for 
being here.
    As she said, I am a new member here, and I come from a 
business background, manufacturing specifically. And because of 
that, I think about two different things all the time: results; 
and processes. And it feels like that is a lot of the debate 
that we are having here.
    What I hear from my colleagues on the other side of the 
aisle is that the CFPB is getting results, however they define 
that, and a lot of them. But I think what matters to a lot to 
us is making sure that we get results by the right process, and 
making sure that we manage that process, because it has always 
been my experience in manufacturing that when you focus only on 
results and driving more through without an adherence to a 
process, you end up with bad results, and results gotten 
through misguided processes.
    When they measure results, don't you think that we--and 
this question will be to Mr. Olson specifically to start with, 
but we can probably get more results if we just suspend the 
Bill of Rights and make the CFPB power unlimited. They could 
then get many, many more results, but I am not sure that we 
would be satisfied or happy with the results. And certainly, I 
don't think we would feel good about the trampling of our civil 
liberties in the process.
    But don't we think if we are just going to focus on 
results, as my colleagues frequently talk about, that we might 
be--that we could get more of them if we just suspended all of 
the limitations on CFPB power, whatever they may be?
    Mr. Olson. Absolutely. I totally agree with you. If you 
eliminated elections, if you eliminated all of the structural 
protections and the Bill of Rights, you could do whatever you 
wanted to do. You would call that results. Over the long term, 
the results would not be acceptable to the American people, 
because our liberties and our freedoms are bedrock to our 
constitutional system of government.
    Mr. Hollingsworth. Mr. White?
    Mr. White. I agree. And as the Framers indicated, the first 
and foremost safeguard of our liberties is, in fact, the checks 
and balances, the structural Constitution.
    Mr. Hollingsworth. Absolutely. Again, I talk about 
misaligned incentives a lot in my prior business career--if you 
provide people the incentive to deliver in one metric alone, 
without governing some of the how they get there, people will 
find a way to do that. And I think in the CFPB's case, that is 
certainly the case. In the way that they are funded and 
elsewhere, we provided them incentive to take action, and let 
that incentive somewhat unchecked. And because of that, we have 
gotten some poor results.
    And so, I guess--I know we have talked a little bit about 
the constitutionality, but the process for getting back under 
constitutional governance, walk me through some of the steps 
that you would see, Mr. Olson, in terms of how we might pursue 
that and what mechanically we can do to begin to get that 
process back under control.
    Mr. Olson. We would recommend that Congress restore the 
President's power to control the subordinates in the Executive 
Branch, those who enforce the law. Restore congressional 
control over the budget of the agency, because that gives the 
agency the responsibility to come to you and say, ``Here is 
what we have done, here is how we are doing it, these are the 
funds that we need in order to do it.'' You then ask the 
questions. You conduct your oversight. That has been completely 
removed.
    We also made other suggestions in our written testimony, 
but those are the two things that strike me as the most 
important, because it is this body, the congressional body, 
that controls and makes the laws and needs to have that 
oversight. And it is the President, then, who has the 
responsibility to see that it is done properly in accordance 
with the laws that you enact.
    Mr. Hollingsworth. Right. When I hear my friends across the 
aisle talk about what counts, I think accountability counts. 
And it really matters in setting up a system that reflects the 
will of the people. And I know in my district, transferring a 
little bit from my business career to the campaign of the last 
18 months, what I heard over and over again from my 
constituents was a grave concern of the expansion of a 
bureaucracy, an expansion of a bureaucracy that has more and 
more power over their lives, the power to shape their futures, 
to determine the limits of their opportunities.
    And they don't get any recourse. There is no means of 
redress to those individuals. They can't call them up in the 
same way they call me every single day to tell me they hate 
what I am doing, they don't like what I am doing, or, 
alternatively, that they love what I am doing and I should keep 
going, right? And we need that level of accountability. And I 
think much of what I heard in the last election was the feeling 
like the officials they elect no longer have the power to shape 
their futures, but it is, instead, the unelected bureaucracy 
that continues to limit their futures.
    And I hope that if we took anything away from the last 
election, it was a feeling that the power needs to go back to 
the people and their elected representatives that those people 
are putting in office.
    Thank you so much for being here.
    Chairwoman Wagner. The gentleman yields back. The Chair now 
recognizes the gentlelady from Ohio, my good friend Mrs. 
Beatty, for 5 minutes.
    Mrs. Beatty. Thank you so much, Madam Chairwoman. How much 
I like saying that, like history.
    And to my colleagues and the ranking member, and all of our 
scholarly witnesses today, thank you for being here.
    I believe in transparency. I believe in having someone 
oversee or be a free-spirited, maybe you want to call it 
independent watchdog for the least of these. I have had the 
opportunity to read all of your testimonies, to read about your 
background. So for my time, I am going to ask some yes-or-no 
questions, because you are scholarly, and I know you will take 
long answers and our time will run down.
    So we are just going to go one, two, three, four, yes or 
no. Okay? So are you aware that the Consumer Financial 
Protection Bureau--and I am going to say that whole word every 
time, because my colleagues oftentimes refer to it as ``the 
Bureau.'' Now, I have a thought behind that. I think if you are 
talking to America, like we do and you say ``bureau,'' most 
people don't know what that is.
    So maybe there is a reason that we don't say Consumer 
Financial Protection Bureau. That sends a whole different 
message to the Nation, that they may feel a little safer, they 
may feel that there is someone protecting them. So I am going 
to encourage everybody to have that education awareness and not 
call it ``the bureau'' but to call it what it is, the Consumer 
Financial Protection Bureau.
    So with that said, are you aware of the $11.8 billion of 
relief to consumers by the Consumer Financial Protection 
Bureau?
    Mr. Olson. I am aware of the statistic.
    Mrs. Beatty. Yes. I take that as a yes. Right down the 
line.
    Mr. Prakash. Not until today, madam.
    Mr. White. Not until today.
    Mrs. Beatty. But you are aware. It doesn't matter--I don't 
care if you learned yesterday, today, or 10 minutes ago. Are 
you aware?
    Mr. Prakash. As of now, yes.
    Mr. White. Yes, I believe you.
    Ms. Gorod. Yes.
    Mrs. Beatty. Okay. How about $3.7 billion in monetary 
compensation to consumers as a result of enforcement activity?
    Mr. Olson. I am aware of those statistics.
    Mr. Prakash. Yes.
    Mr. White. Yes.
    Ms. Gorod. Yes.
    Mrs. Beatty. $7.7 billion in principal reductions, canceled 
debt, and other consumer reliefs as a result of enforcement 
activity?
    Mr. Olson. Yes.
    Mr. Prakash. Yes.
    Mr. White. Yes.
    Ms. Gorod. Yes.
    Mrs. Beatty. $371 million in consumer relief as the result 
of supervisory activity?
    Mr. Olson. Yes.
    Mr. Prakash. Yes.
    Mr. White. Yes.
    Ms. Gorod. Yes.
    Mrs. Beatty. Did all of these yeses sound like great 
things?
    Mr. Olson. It depends upon how you get there.
    Mrs. Beatty. Yes or no?
    Mr. Olson. Not necessarily.
    Mr. Prakash. I can't say.
    Mr. White. I am happy to agree with you on these.
    Ms. Gorod. Yes. And I hope I have the opportunity to 
explain why--
    Mrs. Beatty. Fifty percent of the people get it right. You 
just agreed to four major things to disagree with yourself. 
Welcome to the world of what I am in.
    So here is the thing: We have these hearings--so let's go 
now, move quickly to the whole issue of the Constitution.
    So I will start with you, Mr. Olson. Do you think that the 
constitutionality of a law passed by Congress is for a Federal 
judge to decide? Yes or no?
    Mr. Olson. It is not just for Federal judges to decide.
    Mrs. Beatty. But is it for the Federal judges?
    Mr. Olson. That is a part of the judicial--
    Mrs. Beatty. So, that is a yes. Okay. Next?
    Mr. Prakash. Yes.
    Mrs. Beatty. Okay. Yes?
    Mr. White. Yes, all three branches do, yes.
    Mrs. Beatty. Okay. So to me, I agree. I would be a yes as 
well. But yet we are in the middle of deciding the very 
question with regard to the structure of the Consumer Financial 
Protection Bureau. So that would mean, to me, by the scholars 
and your responses, that that makes absolutely no sense.
    So let me move quickly to a story that I read about you, 
Mr. Olson, and I just want to say it publicly. I am in a house 
of all lawyers. My husband told me a wonderful story about you 
traveling and a young man was discriminated against. And while 
he was a scholar and brilliant, he was African American. And 
you stood up for him because you said we need to protect one 
another, and we need people to be responsible for the least of 
us and our brothers and sisters.
    Is that a true story?
    Mr. Olson. Yes, it is a true story. And thank you.
    Mrs. Beatty. So I relate that kind of to what we believe 
that the Director or the independent watchdog is protecting 
those folks. And so that is one of the reasons I am a supporter 
of the Consumer Financial Protection Bureau. And my time is up. 
Thank you so much.
    Mr. Olson. Thank you.
    Chairwoman Wagner. I am very sorry that the gentlelady has 
to yield back.
    The Chair now recognizes another new member of the 
Oversight and Investigations Subcommittee, the gentleman from 
Tennessee, Mr. Kustoff, for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman.
    Mr. Olson, first of all, thank you for being here, and 
thank you for your public service to our country.
    I have listened to everybody's statements about the 
constitutionality and the structure of the CFPB, and without a 
doubt, to me, it does seem that the structure, the way it is 
composed is unconstitutional. Now, we can also debate the need 
for the CFPB, but for our purposes today, if the President were 
to come to you and say, Mr. Olson, I think there is some need 
for the CFPB, but I want it to be structurally sound, I want it 
to be constitutionally sound, can you paint a framework of what 
you think the bureau would look like, how it would be composed? 
Would there be one director? Would there be a panel of 
directors? To whom would they ultimately be accountable? Could 
you paint a general structure of what that would look like and 
how it would be constitutionally sound?
    Mr. Olson. Yes. I would suggest that the CFPB be a part of 
the Executive Branch, created like an Executive Branch agency, 
such as the Energy Department, such as the Justice Department, 
such as the Treasury Department. Whether it be managed by one 
individual or a panel of individuals, that it be responsible to 
the President; that it be responsible to Congress in enforcing 
the laws; that that agency, along with the White House and the 
administrative branch and the OMB, would have to come to 
Congress and justify its budget. And then you would pass its 
budget, conduct oversight hearings over what it was going to 
do, and supervise that agency, but hold the President 
responsible for what that agency does.
    And if that agency does--is abusive, then he is 
responsible, not only to you in Congress, but also to the 
electorate. But if he doesn't have the authority to make sure 
that that agency is conducting itself in a way that is 
consistent with the laws, he must be accountable. And the only 
way he can be accountable, if he has the power to remove an 
individual who is not following his policies.
    Mr. Kustoff. To remove for any reason? To remove for a 
reason or--
    Mr. Olson. No. The President is elected to faithfully 
execute the laws of the United States. He or she has to 
determine the policies pursuant to which those laws are going 
to be enforced. And the President must exercise that authority. 
He doesn't have to have a reason to remove the Secretary of the 
Treasury. And he shouldn't have to have a reason to remove a 
member of the Executive Branch who has a responsibility to him 
under the Constitution.
    Mr. Kustoff. In other words, that director or that board of 
directors would serve at the pleasure of the President?
    Mr. Olson. That is correct.
    Mr. Kustoff. Thank you, Mr. Olson.
    I yield back.
    Chairwoman Wagner. The gentleman yields back.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Capuano, for 5 minutes.
    Mr. Capuano. Thank you, Madam Chairwoman.
    I want to thank the panel. I apologize for running in and 
out, but, as you know, that is what we do here.
    I guess--I would like to state, first of all, I guess it is 
great to be here at another hearing. This is, to my knowledge, 
the 63rd hearing we have had on the CFPB, and not one hearing--
actually, I take it back. One hearing. One hearing we had on 
the impact of the CFPB that was related to Wells Fargo. Other 
than that, we have never had any consumers here who have kind 
of gotten it in the neck that the CFPB has protected, but we 
will just keep doing hearings on it until we get tired of it.
    I guess I would like to follow up on a couple of things. 
First of all, Mr. Olson, look, you are a world-class lawyer, 
you are a world-known lawyer. Is this a normal situation you 
have heard of where the full court of a D.C. Court of Appeals 
takes an en banc decision from a three-judge panel? Is that 
normal? I know it happens.
    Mr. Olson. It happens. It happens a few times a year.
    Mr. Capuano. So it happens, but it is a little unusual?
    Mr. Olson. It is unusual for any appeals court to hear a 
case en banc, you are correct.
    Mr. Capuano. Okay. That is what I expected, and that is 
what I believe to be true.
    I guess--I don't have to ask because I think you all know 
that we have many people in the Federal Government who are 
appointed for a term of years and can't be replaced without 
cause. For instance, we just had a gentleman here--not in this 
committee but another committee yesterday--saying that the FBI 
Director is appointed for 10 years. Nobody complained about 
that.
    What about the Federal Reserve Board? They are appointed, 
can't be removed. Should we be able to remove the FBI Director 
like that? Should we be able to remove the Chair of the Federal 
Reserve Board like that for political reasons? And I understand 
the arguments for anything. But I am just curious, are those 
two that you would also have us remove, Mr. Olson?
    Mr. Olson. The FBI Director is removable and has been 
removed by the President. Within the last 10 or so years, an 
FBI Director was removed.
    Mr. Capuano. For a cause. Mr. Comey just said he is going 
to serve out the rest of his term.
    Mr. Olson. We have heard a little bit about what cause 
means under what circumstances, but the--
    Mr. Capuano. I understand that. So you think the FBI 
Director should be able to be withdrawn, be able to be fired 
for political purposes? And that is okay. It is a good opinion. 
I just want to--I'm curious about your opinion.
    Mr. Olson. It is a good reason, if you hold the President 
responsible.
    Mr. Capuano. So you think he should. I get it.
    Mr. Prakash, do you think that we should be able to fire 
the FBI Director or the Federal Reserve Chair?
    Mr. Prakash. Representative Capuano, I think you are 
mistaken. The FBI Director serves at pleasure. President 
Clinton removed the--
    Mr. Capuano. I think you are mistaken. He serves for a term 
of 10 years. He just said on TV the other day that he is 
staying for another 6 years. I don't think he can say that 
without some confidence.
    Mr. Prakash. The term of office does not preclude removal 
at pleasure. President Clinton removed the FBI Director without 
cause.
    Mr. Capuano. For a reason.
    Mr. White, do you think we should be able to do it for 
political reasons as well?
    Mr. White. For policy reasons, disagreement over policy?
    Mr. Capuano. Yes, the Federal Reserve Chair.
    Mr. White. In my testimony, I point out that the Supreme 
Court said in Bowsher v. Synar, they indicated that policy--the 
policy--
    Mr. Capuano. I guess--look, guys, simple questions. I 
understand the argument that we should be able to do it. The 
question is, should we be able to do it with everybody? And if 
the answer is yes, that is a fair answer; it just happens to 
not be the case.
    And then there being--the point that I am trying to make is 
there are clearly some people in the Federal Government that 
Congress and the President have decided over the years should 
not be removable for political purposes.
    Now, I understand if you disagree with them. That is fine. 
You come to Congress and you ask us to pass a law to change 
that. That is fine. Thus far, my colleagues on the other side 
haven't done that. And that is what you are here for today.
    If I am not going to get clear answers, I guess I will just 
finish off with Ms. Gorod. Do you think we should be able to 
remove every Federal employee just for political reasons?
    Ms. Gorod. Obviously not, and I think that underscores an 
important point. The opponents of the CFPB like to pretend that 
it is somehow anomalous or novel. And the fact is, there are a 
number of other agencies that are headed by a single director, 
there are a number of other agencies that have officers who are 
removable only for cause, and it is not even the first agency 
to combine those two features.
    Mr. Capuano. Fair enough. I appreciate that. My time is 
running out, so I have two more points to make.
    First of all, for the people who are listening who don't 
know this, what PHH was alleged to have done, was proven twice 
now to have done--actually, three times, but that is a 
different issue--is that they brought people in to give them 
mortgages and then required them, for all intents and purposes, 
to buy mortgage insurance from their company for kickback 
purposes. They were caught at that charging people more, 
charging people more for their mortgage if they didn't do it 
and basically ordered to disgorge $109 million of 
inappropriately gotten gains. Now, I understand that those are 
facts that may be disputed in court, but at the moment that is 
where we are.
    So I want people at home to understand what we are talking 
about. That is the case where consumers of--homeowners are 
getting stuck to that you are defending.
    Mr. Olson, last question, do you or your firm represent 
PHH?
    Mr. Olson. Yes, we do. And I came here to discuss the 
constitutional question, not the issues involved in that case.
    Mr. Capuano. I appreciate that. This doesn't strike you as 
a conflict of interest that you are in court with a client that 
is paying you--
    Chairwoman Wagner. The gentleman's time has expired.
    Mr. Capuano. --and you are here to talk about the issue 
that they are in court about? I think that is a massive 
conflict of interest.
    Chairwoman Wagner. The gentleman's time has expired.
    The Chair now recognizes a new member of our committee, the 
gentleman from Michigan, Mr. Trott, for 5 minutes.
    Mr. Trott. Thank you, Madam Chairwoman.
    And thank you to the panel for being here.
    And as an aside, what I just heard is a complete 
misunderstanding of the conflict-of-interest rules as they 
relate to the legal profession, but we will save that argument 
for another time.
    Ms. Gorod, I want to start with you. And in your testimony, 
you wrote--and before I get into the constitutionality issues, 
I want to talk about kind of the underlying reason for the 
financial crisis. And in your testimony, you wrote: ``After 
months of evaluating the roots of the financial crisis and 
assessing different types of reforms needed, lawmakers 
concluded that the major culprit was the failure of a 
fragmented and unaccountable consumer financial protection 
regime to safeguard homeowners from reckless financial 
products.''
    You wrote it. I assume you believe that. A lot of times 
when we write regulations in Washington, we justify them by 
saying we need to write these regulations because the private 
sector has run amuck.
    And I want to read an editorial from the Journal from 2011: 
``Beginning in 1992, the government required Fannie Mae and 
Freddie Mac to direct a substantial portion of their mortgage 
financing to borrowers who were at or below the median income 
in their communities. The original legislative quota was 30 
percent, but HUD gives authority to adjust it. And through Bill 
Clinton and George Bush, HUD raised the quota to 50 percent in 
2000, 55 percent in 2007.''
    So was the cause the mortgage-backed security in the 
financial products that weren't well understood or was the 
cause of these regulations that came to pass under Dodd-Frank 
created by government action which created the crisis in the 
first place?
    Ms. Gorod. Congress spent a considerable amount of time 
studying the causes of the financial crisis and concluded that 
one of the major problems was the failure of existing 
regulatory authorities to act because regulatory authority was 
dispersed over a number of different regulatory agencies. They 
decided that a new Consumer Financial Protection Bureau that 
was headed by a single director, removable only for cause, 
would be the best way for--
    Mr. Trott. We will talk about that in a minute, but--so you 
are saying that nothing happened in Washington that 
precipitated the crisis. The idea that every American should 
own a home when they shouldn't, that wasn't a major cause of 
the crisis?
    Ms. Gorod. I am saying that what Congress concluded was 
that there was an absence of comprehensive and effective 
regulation and that a way to address that would be to create 
the CFPB.
    Mr. Trott. Okay. Let's talk about the CFPB then. You wrote 
in your testimony that, ``The court has explained that 
assessing the constitutionality of a removal restriction is 
whether the restriction impedes the President's ability to 
perform his constitutional duty.''
    And you are not bothered that the current regulation 
impedes that because Dodd-Frank provides that the President may 
remove the Director for inefficiency, neglect of duty, or 
malfeasance in office. So you believe there are no 
constitutional issues. Right?
    Ms. Gorod. I believe there are no constitutional issues, 
and the Supreme Court has repeatedly recognized that there are 
no constitutional issues.
    Mr. Trott. Right. And you talked about other agencies that 
have directors who have to be removed for cause, right? And we 
will talk about that in a minute.
    So let me ask you, how would we go about making a case for 
removing Mr. Cordray? We couldn't argue, if I was the 
President, that he has been inefficient. The CFPB has been very 
busy. We couldn't argue there has been a neglect of duty. Every 
day, they come out with new charges against some financial 
product or institution, so there is no neglect of duty.
    So we would have to argue that there is some kind of 
malfeasance, which is defined as the failure to discharge 
public obligations existing by law, custom, or statute. So how 
would we make a case if we wanted to remove Mr. Cordray that he 
is somehow guilty of malfeasance? Could the President do that?
    Ms. Gorod. I think I would perhaps agree with you that 
there is no case to be made against Director Cordray. There is 
no basis for removing him for cause. But the fact is that if he 
did violate the for-cause provisions, then the President would 
be able to remove him. And I think this is a moment to 
underscore that the President has no authority to violate the 
Dodd-Frank statute in contrast to what the other folks up here 
have said.
    Mr. Trott. Reclaiming my time, let's go to Mr. Olson's 
testimony and have you explain how we would argue--let's take 
Mr. Cordray out of it, because obviously you like him. Let's 
just say there is someone there that you didn't like. And here 
is their job description as defined by Mr. Olson: It is headed 
by a single director who has broad discretion to enforce 19 
Federal consumer protection laws, promulgate regulations, 
litigate in the name of the Federal Government, punish private 
citizens, all without any accountability to the President in 
whom the Constitution vests executive power.
    So with that broad authority, how could you ever argue 
someone--you might disagree with what they are doing, but you 
couldn't make an argument that they are guilty of malfeasance, 
could you?
    Ms. Gorod. I think there very well could be circumstances 
in which one was guilty of malfeasance. I think there is no 
evidence of that with respect to Mr. Cordray.
    Mr. Trott. We are done talking about Mr. Cordray.
    I want to ask Mr. Olson a question in my last 30 seconds. 
So let's talk about due process for a minute. From my 
perspective, what happened to PHH--and I know you are not here 
to talk about that case, but it was a $6 million or $9 million 
fine for Section 8 issues, and then all of a sudden the CFPB 
swept in and said, no, really the fine is going to be $109 
million.
    How easy is it to fight the government? The government has 
no budget in terms of its litigation expenses. The government 
has no accountability in terms of when they decide not to 
pursue a case or defend a case. So in your experience, sir--
forget PHH--isn't it a pretty unevenly balanced scale when you 
have to litigate against the United States Government on a fine 
that they are trying to assess against your organization?
    Mr. Olson. I have been on both sides, in the private sector 
and in the government. It is very, very difficult to fight 
against the government because the government, essentially, has 
unlimited resources and an unlimited budget. It is very hard 
for a private citizen to--
    Mr. Trott. My time has expired, but it is best if you just 
pay the fine and move on because you are probably going to end 
up losing even if you have to pay your own litigation expenses.
    Chairwoman Wagner. The gentleman's time has expired.
    Mr. Trott. Thank you.
    Chairwoman Wagner. The Chair now recognizes the ranking 
member of the full Financial Services Committee, the 
gentlewoman from California, Ranking Member Waters.
    Ms. Waters. Thank you very much, Madam Chair.
    First, let me just say something to the Honorable Theodore 
Olson, partner, Gibson, Dunn, & Crutcher. You don't know me. I 
basically know you from the press. And despite the fact that we 
don't know each other, I have absolutely lived with your pain, 
based on the telephone call from your wife that was given wide 
publicity. And so I want you to know that I would really like 
to beat up on you badly today, but I am not going to do it 
because of, not only what you have experienced, but because of 
the Hollingsworth v. Perry case, the LGBT case that you were 
involved in.
    And so, basically, I think you are a superb attorney, a 
fine lawyer, and you don't deserve to be in this position that 
you are in today. It is beneath you.
    Now, having said that, I am going to leave you alone and 
tell you this: Dodd-Frank is extremely important and valuable 
to this country. But the centerpiece of it is the Consumer 
Financial Protection Bureau.
    For us all to know and understand that the consumers of 
this country literally had no protection, nobody speaking up 
for them, nobody looking out for them prior to Dodd-Frank, is 
for us to say, well, they deserve to have someone speaking up 
for them and doing this job that was created in Dodd-Frank so 
that they would never be in the position again where they were 
being ignored, dropped off of America's agenda.
    I don't know how anybody, my friends on the opposite side 
of the aisle, could be against representation for consumers. 
You know and understand what payday lenders have done to them. 
You know and understand what debt collectors have done to them. 
You know about student loans. You know about the automobile 
industry and how it targeted communities and overcharged 
interest rates on the people who could least afford them. You 
know all of this.
    And so for those who come in here supporting getting rid of 
the Consumer Financial Protection Bureau and going along with 
this argument about it is unconstitutional, et cetera, et 
cetera, what are you doing, and why are you doing this? Are you 
simply the tools of those who would exploit and those who would 
commit fraud, those who would steal from the people who are the 
most vulnerable in our country?
    And so I take this time to admonish all of you who are 
doing it. And I take this time to thank Ms. Brianne Gorod, the 
chief counsel, Constitution Accountability Center, for being 
able to be in a position to really talk about what our 
Constitution is, what it is all about.
    This three-judge panel, I ignore. I don't pay any attention 
to that. And I am glad that that decision was vacated, because 
I think in the final analysis, some of the right questions are 
being raised.
    And this PHH that you are representing, Mr. Olson, in my 
estimation, does not have a leg to stand on.
    And so all that I want to say is this: I am committed to 
fighting as hard as I can for the Consumer Financial Protection 
Bureau, and I consider that one of the most important fights of 
my career. Starting out in the California legislature, it was 
all about consumers and poor people and people who were being 
ripped off in our society.
    And I finally, here in the Congress of the United States, 
got a chance to work on Dodd-Frank, served on the conference 
committee, worked through some of the problems, worked through 
getting consensus on some of the issues of Dodd-Frank. And I 
and others are not about to allow it to be destroyed. And I 
just want to continue my advocacy and my disappointment with 
those who have shown less care and concern for consumers.
    So with that, my time is up.
    Mr. Olson, go do some of that fabulous work that you know 
how to do. Get rid of this case. You are better than this.
    Chairwoman Wagner. The gentlelady's time has expired.
    Ms. Waters. Thank you. I yield back the balance of my time.
    Chairwoman Wagner. The gentlelady yields back the balance 
of her time.
    It is now my pleasure to introduce another new member of 
our O&I Subcommittee, the gentleman from Georgia, Mr. 
Loudermilk, for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman, and thank you 
for holding this hearing.
    It has been very interesting, as I sit here and I listen to 
a lot of the discussion that is going on. And I think, as we 
started off, this is a constitutional discussion, at least from 
those of us on this side of the dais here.
    A quick question for Ms. Gorod: How did we get Dodd-Frank? 
That was an act of the legislature. Right?
    Ms. Gorod. That is correct.
    Mr. Loudermilk. Which was in the purview of the Legislative 
Branch to set public policy?
    Ms. Gorod. That is right. The Constitution gives Congress 
great flexibility to determine--
    Mr. Loudermilk. So it was a law that was passed, and that 
was our responsibility.
    Mr. White, what is the responsibility of the Executive 
Branch when Congress passes a law such as this?
    Mr. White. To execute it insofar as it is constitutional.
    Mr. Loudermilk. Okay. If there is a difference in the 
opinion of what a law does between the Executive Branch who is 
executing it and the Legislative Branch's original meaning, who 
determines that?
    Mr. White. Each branch has to determine for itself in light 
of--
    Mr. Loudermilk. But if there is a difference between the 
interpretation of what was intended?
    Mr. White. Oftentimes, these issues end up in court.
    Mr. Loudermilk. And the Judicial Branch a lot of times 
determines that.
    Mr. Prakash, could you, really quickly, for the people 
watching out here, tell us in layman's terms, what is Chevron 
deference?
    Mr. Prakash. Chevron deference is a doctrine from the 
courts that says that courts should defer to the reasonable 
constructions of statutes issued by agencies.
    Mr. Loudermilk. So, basically, it says that if there is a 
misinterpretation, then the agency determines what the 
interpretation of the law is?
    Mr. Prakash. And the way to put it is, if there is wiggle 
room in the statute, the agency wins.
    Mr. Loudermilk. Okay. And that is what I want to focus on, 
Mr. Olson, is the Chevron deference here, because--and we know 
that there is no single agency entitled to full Chevron 
deference in the courts when there is multiple agencies that 
have the ability to enforce that law, with the exception of the 
CFPB.
    And in your testimony, you stated that if the Director and 
the President disagree on the interpretation of Federal 
consumer finance law, the CFPB Director's view is accepted, 
basically that the courts are told you have to listen to the 
CFPB. Does that not give the CFPB Director more power than the 
President over consumer financial protection law?
    Mr. Olson. The way this statute and this agency is 
structured, you are absolutely right. It is not just the 
deference that courts will accord where a statute is ambiguous, 
but the scale and the breadth of authority given to the 
Director of this agency to decide what is fair, what is 
reasonable, what is an abuse, and so forth. It is you who have 
delegated to that agency an inordinately broad power of 
legislative activity to decide what is right and what is wrong.
    Mr. Loudermilk. Has any other agency, department head or 
agency head, ever had that level of power?
    Mr. Olson. I believe that the worst delegations of 
authority to agencies is all wrapped up in this agency. So some 
of the worst things that have happened in other agencies, there 
are problems in other places, but the breadth of the authority 
here and the lack of oversight and responsibility to Congress 
and to the executive, I have never seen it in any other agency.
    Mr. Loudermilk. So basically, what we are seeing with the 
CFPB, as Ms. Gorod stated, that we have legislative power to 
set policy. Mr. White stated the executive has a responsibility 
to execute that, but there is a Chevron deference. So if there 
is a difference, then the courts have to lean toward what the 
agency says.
    But in this case, basically the CFPB is given power above 
the Judicial Branch because the Judicial Branch is told how you 
must interpret, and the Legislative Branch because they can 
interpret any way they want to. Is that a fair assessment?
    Mr. Olson. It is not complete, because the courts can come 
in and say, ``You have just gone too far, you have gone beyond 
the statutes, you have interpreted things in the wrong way.'' 
That has happened. And this agency is subject to the judicial 
oversight as well. But there is an awful lot of wiggle room, as 
my colleague has put it, a tremendous breadth of authority 
given to this agency and very little supervision.
    Mr. Loudermilk. And in closing--I am running out of time--
at risk of sending a lot of people into a tizzy, which is okay, 
I don't care, we have heard a lot of discussion about 
corruption and all this.
    Our Founders were very clear that separation of powers was 
to prevent corruption. In fact, many times they cited a verse 
of scripture, Jeremiah 17:9, that says men's hearts are 
deceitfully wicked. Basically saying, left unchecked, 
regardless of how good their intentions are, if you give power, 
greed and ambition will override good judgment every time. That 
is why we have brought the separation of powers in, and we have 
totally run over that in the case of the CFPB. Would you agree?
    Mr. Olson. I do. I agree.
    Mr. Loudermilk. Thank you, Madam Chairwoman. I yield back.
    Chairwoman Wagner. The gentleman yields back.
    It is now my pleasure to recognize the gentlelady from New 
York, Ms. Tenney, for 5 minutes.
    Ms. Tenney. Thank you, Chairwoman Wagner.
    And I thank the panel for being here today. It is an 
extremely important hearing.
    Like Mr. Hollingsworth, I too am a business owner and am 
uniquely aware of the difficult access to credit for small 
businesses, as I come from one of the poorest and highest taxed 
districts in the Nation, in central New York. And I see the 
CFPB as more of an obstacle. I respectfully disagree with my 
colleagues.
    I understand that Dodd-Frank has just given this--I deem it 
unconstitutional, as someone who is also an attorney and who 
has done a little work before the Federal courts in fighting 
what Chevron has become.
    And I know that you have answered many of the questions, 
but I would just like to direct this to Mr. Olson, since I 
commend you on your fine service and also I have had the 
pleasure of actually reading some of your briefs before the 
Supreme Court.
    And I just wanted to know--we obviously know the structure 
is a legislative delegation of power unchecked; you have 
discussed all that. Can you just comment, if you can, about 
where you think the future of the Chevron deference is going to 
be? As you say, this unaccountable legislative delegation, the 
courts can actually draw this back. But are the courts actually 
doing that? Is that something we can--in your opinion, what 
does the Supreme Court look like in the future where we can 
actually start rolling back some of these overbloated 
bureaucratic schemes and some of the overreach of power with 
the CFPB?
    Mr. Olson. It is very hard to predict, of course, what the 
Supreme Court might do in a particular case. But I think there 
is a widespread consensus that the Chevron doctrine, the 
deference to decisions by administrative agencies interpreting 
their own authority, has gone pretty far, maybe too far.
    And when Congress gives broad discretion to administrative 
or Executive Branch agencies, and then they decide to interpret 
that authority in ways that are very, very expansive, the 
courts perhaps should exercise a more scrupulous role in 
disciplining that process.
    Ms. Tenney. Don't you think that it would be, in your 
opinion, a good thing for this to be rolled back into the 
Executive Branch--I know you have sort of touched on this--so 
that we can have oversight, the jurisdiction of the Oversight 
Committee in addition to the Office of Management and Budget?
    It just seems to me that this is just an out-of-control 
agency, as a new member and someone who has seen what happens 
in a State with a very large bureaucracy and a very large 
Executive Branch that is somewhat out of control, and might I 
add, sadly considered one of the most dysfunctional and most 
corrupt legislatures in the Nation. But something I see 
happening on the Federal level is this enormous bureaucracy 
unchecked. So--
    Mr. Olson. I agree with that. I think that it needs to be 
brought into check--into the constitutional system.
    Ms. Tenney. Right.
    Mr. Olson. I think that Congress went way too far with this 
agency, and it could be a model, as one of my colleagues said, 
for legislation in the future. Why not roll the Justice 
Department, why not roll the Treasury Department, why not roll 
the EPA all into one agency and then give that individual 
running that agency complete power to do what basically 
whatever he or she wants to do? That is a very, very bad model. 
It is a very unconstitutional model. As I said at the end of my 
testimony, it is a constitutional nightmare.
    Ms. Tenney. I agree wholeheartedly. Thank you so much for 
your comments and for the panel today. I appreciate it. Thank 
you.
    And I yield back.
    Chairwoman Wagner. The gentlelady yields back.
    It is now my honor to recognize the chairman of the full 
Financial Services Committee, Chairman Jeb Hensarling from 
Texas, to testify and to ask questions for 5 minutes.
    Mr. Chairman, you are now recognized.
    Chairman Hensarling. Thank you, Madam Chairwoman. And thank 
you for holding an incredibly important hearing.
    The first thing that any Member does after they are elected 
and they come onto the House Floor is they raise their right 
hand and swear an oath to uphold and defend the Constitution. 
Every Member has that personal responsibility. And they do it 
under oath.
    And so I want to thank you, Madam Chair, for having this 
hearing so that Members can be enlightened as to this critical 
debate on the constitutionality of this agency.
    And it should not go unheeded that a three-judge panel of 
the second highest court in the land has ruled it 
unconstitutional. I don't know what is going to happen once the 
entire court meets en banc. I don't know what will happen if 
this is appealed to the Supreme Court. But very learned jurists 
have found this to be an unconstitutional agency, and it is one 
that we should take very, very seriously.
    And unfortunately, as I listen to many arguments of my 
friends on the other side of the aisle, what comes ringing 
through is that somehow the ends justify the means, and that as 
long as there is some noble purpose here, we should be 
indifferent to the means by which we get there. But I don't 
believe so.
    So to some extent, I want to follow up on a line of 
questioning, I think it was from the gentleman from Indiana, 
Mr. Hollingsworth. But I will ask you, Ms. Gorod, if we 
repealed Miranda rights, do you think that our criminal justice 
system would receive more convictions?
    Ms. Gorod. I don't think anyone is saying that the ends 
justify the means. The position of--
    Chairman Hensarling. That is not the question. The question 
is, if we repealed Miranda rights, would we have more 
convictions? Do you have an opinion on the matter? If you 
don't, I will ask another witness.
    Ms. Gorod. We might. But the point is--
    Chairman Hensarling. Okay. We might. What if we repealed 
the Fourth Amendment? Do you think we would have more criminal 
convictions if we repealed the Fourth Amendment to the 
Constitution? Do you have an opinion on that, Ms. Gorod?
    Ms. Gorod. Again, we might. It is an empirical question.
    Chairman Hensarling. Okay. Thank you.
    So what we know is that we have numerous individuals, 
companies, agencies that perhaps have been accused of misdeeds. 
And what we have is our friends on the other side of the aisle 
saying, don't you see all these fines? Don't you understand 
that they must be guilty because they have been accused of 
something?
    I suppose if we started beating accused criminals with 
rubber hoses, we might also have more convictions as well, but 
that is not the point. The point is, what has happened to due 
process? What has happened to due process under the law? Where 
are our constitutional foundations?
    And so the first question I have to ask--and we haven't 
even gotten into the point of, is this agency on a net basis 
actually helping consumers, when I see that all of a sudden 
after its advent, free checking has been cut in half at banks, 
bank fees are up, the ranks of the unbanked have increased, and 
many of those who are pursuing auto loans are now paying more. 
Under the qualified mortgage rule, fully implemented, one-third 
of all Blacks and Hispanics will no longer qualify for a 
mortgage, yet I hear no outcry from my friends on the other 
side of the aisle. That is not me saying it. That is the 
Federal Reserve.
    So let's set aside for the moment the injury that this 
agency has done to consumers, and let's just focus as Americans 
who take an oath to the Constitution, let's look at due process 
questions.
    First, starting with you, Mr. Olson, as we erode checks and 
balances, do you have an opinion on how due process is being 
upheld currently at the CFPB?
    Mr. Olson. One of your colleagues said that power corrupts, 
and that is an aphorism that we have to live with. And the 
reason that we have the checks and balances and the separation 
of powers is to prevent that corruption from taking root and 
abusing the rights of our citizens and taking away due process.
    Chairman Hensarling. Mr. Prakash, do you have an opinion on 
the matter? Have you observed how due process is being 
practiced at the CFPB?
    Mr. Prakash. Mr. Chairman, I am not here to testify about 
the policy of having a CFPB. And I am not here to--I don't know 
anything about the fines that were levied. I am making a purely 
constitutional claim that I think should appeal to Republicans 
and Democrats. If President Trump appoints Joe Deregulator and 
decides to totally gut the CFPB, I would still be making the 
claim I am making today.
    Chairman Hensarling. Mr. White, do you have an opinion on 
the due process issue?
    Mr. White. I do think that the way the CFPB went about 
asserting jurisdiction over auto dealers, auto loans through 
informal guidance documents without the real rigorous work of 
notice and comment rulemaking was troublesome.
    Chairman Hensarling. Thank you. I appreciate your 
testimony.
    Chairwoman Wagner. The gentleman yields back.
    The Chair now recognizes the distinguished ranking member 
of the subcommittee, Mr. Green, for 5 minutes.
    Mr. Green. I thank the Chair.
    Mr. Prakash, you would have Morrison overturned. Is that 
correct?
    Mr. Prakash. Yes, sir.
    Mr. Green. And Morrison, for edification purposes, is 
styled Morrison v. Olson, is that correct?
    Mr. Prakash. Yes, sir.
    Mr. Green. And the ``Olson'' of whom we speak is the 
``Olson'' who is seated next to you. Is this correct?
    Mr. Prakash. Yes, sir.
    Mr. Green. You decided that you would come to this hearing 
today and give your testimony, understanding that the lawyer 
who represents PHH, a case pending in Federal court, would be 
here today giving his client's cause a hearing before Congress?
    Mr. Prakash. I knew that Mr. Olson would be here today, 
yes.
    Mr. Green. Okay. And you agree that this is something that 
is acceptable, to have the lawyer who represents a client with 
a case pending to bring his cause before the Congress of the 
United States of America?
    Mr. Prakash. With all due respect, Representative Green, I 
didn't think it was a problem. I assumed--
    Mr. Green. But now that you are hearing it expressed, a 
lawyer--do you think every lawyer ought to be able to bring his 
client's case before the Congress of the United States of 
America? Can you answer that, please, quickly?
    Mr. Prakash. Honestly, I think it is up to Members of 
Congress to decide who they want--
    Mr. Green. I understand. So your opinion is that it is okay 
for lawyers to bring their cases before Congress?
    Mr. Prakash. I don't have any objection to it, and I don't 
feel that I am doing something wrong.
    Mr. Green. These records are forever, so that will be a 
part of your legacy.
    Let's go on to Mr. White. Mr. White, do you think it is 
okay for lawyers to bring their cases before the Congress of 
the United States of America?
    Mr. White. I think all people should plead their cases to 
Congress. Congress is the first branch.
    Mr. Green. So you are of the opinion that every lawyer 
should bring his client's case before Congress?
    Mr. White. I think Congress stands to defend the rights of 
all Americans, yes.
    Mr. Green. All right. That takes care of your legacy.
    Let's now go on to Ms. Gorod. Ma'am, do you find some 
concern with bringing a case that is pending in Federal court 
before the Congress of the United States of America?
    Ms. Gorod. What I find most troubling are the assertions 
that have been made. The assertion, for example, that the 
President can violate the law which provides that the Director 
can't be removed except for cause. I find troubling Mr. Olson 
and the other witnesses' consistent ignoring of the numerous 
checks and constraints that apply to the CFPB that help 
demonstrate how accountable it is. So those are the things that 
I find most troubling that have happened this morning.
    Mr. Green. I understand they are most troubling. But don't 
you find it troubling that a lawyer who is seated on this panel 
with you has a client whose case is being discussed today?
    Ms. Gorod. I am going to focus on the substantive remarks, 
and I think they are deeply troubling because they are in 
tension with our Constitution's text and history and with 80 
years of Supreme Court precedent.
    Mr. Green. Mr. Olson, I must tell you, I objected to the 
hearing at the genesis of the hearing. I still object to the 
hearing. I think it is entirely inappropriate that you would be 
here, notwithstanding your storied history, notwithstanding all 
of the good that you have done, that you would be here 
representing a client who has litigation that is pending before 
a Federal court.
    The Congress of the United States should not be in the 
business of providing oversight to courts. We shouldn't take up 
these causes before they have been litigated. I think that what 
you are doing is a disservice. It is really a disservice to 
this country in the sense that we are creating this precedent. 
And if it has been done before, it shouldn't have been done 
then. I don't agree with this.
    And if your client, Mr. Olson, is 100 percent right, what 
we are doing today is 100 percent wrong. We ought not have 
lawyers bring their cases, unless we are going to now have 
every lawyer, every lawyer can petition Congress, has a case 
pending in Federal court, let's have my case heard before some 
subcommittee in Congress. I think it is entirely inappropriate 
for this to occur.
    And my hope is, Mr. Olson, that when this case is 
finalized, that at some point you and I can have an additional 
discussion about this, because I believe that this is an 
appropriate thing for us to do, to talk about how we can 
prevent this from happening again.
    With that said, I know that there may be a second round, so 
I will reserve my time for the second round. I yield back.
    Mr. Olson. May I respond briefly?
    Mr. Green. I will yield time to you.
    Mr. Olson. I understand your point of view entirely. I want 
to emphasize that I am here representing my own opinions, not 
representing a client. These are my own views on separation of 
powers, issues that I have spoken and written about for 50 
years.
    Mr. Green. Let me ask you this, Mr. Olson, so if you were 
representing your client's views today--
    Chairwoman Wagner. The gentleman's time has expired.
    Mr. Green. --you would find that unacceptable, if you were 
representing your client's views?
    Mr. Olson. I am not here representing the client.
    Mr. Green. I understand you are not, but if you were--
    Chairwoman Wagner. The gentleman's time has expired.
    Mr. Green. --would you find that unacceptable? Mr. Olson 
finds unacceptable for what--
    Chairwoman Wagner. The gentleman's time has expired.
    It is now my pleasure to recognize a new member of our 
Oversight and Investigations Subcommittee, the gentleman from 
New York, Mr. Zeldin, for 5 minutes.
    Mr. Zeldin. Thank you, Madam Chairwoman.
    The ranking member is criticizing Mr. Olson's appearance 
here because he says it would give his client an unfair 
advantage, however, Ms. Gorod is also representing individuals 
in the PHH case.
    Ms. Gorod, I have some yes-or-no questions for you. First 
off, you represented the ranking member and other Members of 
Congress in proceedings before the D.C. Circuit in the PHH 
case. Correct?
    Ms. Gorod. That is right. I am here representing my own 
views.
    Mr. Zeldin. And in those proceedings, you argued on behalf 
of the ranking member and other clients that the structure of 
the CFPB was constitutional. Correct?
    Ms. Gorod. Yes.
    Mr. Zeldin. In fact, the essential premise of your legal 
argument for why your clients should be allowed to intervene in 
the PHH litigation was a fear that with the inauguration of 
President Trump, only they would be positioned to adequately 
defend the constitutionality of the structure of the CFPB. 
Correct?
    Ms. Gorod. Yes. I think it is important that this issue get 
full review by the courts.
    Mr. Zeldin. And you also are the counsel for an amicus 
brief defending the constitutionality of the CFPB submitted by 
21 former and current Members of Congress, some of whom are 
here with us today, correct?
    Ms. Gorod. That is correct.
    Mr. Zeldin. So to be clear, you are here today testifying 
that the CFPB structure is constitutional at the express 
invitation of some of the very same Members for whom you are 
defending the constitutionality of the CFPB structure before 
the D.C. Circuit. Correct?
    Ms. Gorod. That is right. That is an amicus brief, not a 
party in the litigation.
    Mr. Zeldin. Ms. Gorod, I am concerned that in this narrow, 
and I would say fairly unique setting, your duty to zealously 
represent your clients could be seen to conflict with your 
ability to offer truthful testimony. Can you provide truthful 
testimony?
    Ms. Gorod. Yes.
    Mr. Zeldin. It certainly appears that you are being paid to 
represent Members' interests in court. Are you not representing 
their interests before the committee today?
    Ms. Gorod. I am not being paid by anyone to represent their 
interest in court. We represent Members pro bono.
    Mr. Zeldin. Okay. Are you being paid by your clients at 
all? How are you being compensated for your time?
    Ms. Gorod. I am part of a 501(c)(3) organization that is 
funded.
    Mr. Zeldin. Did you consult with the ranking member or 
other members who are your clients or any of their staff 
regarding your testimony today?
    Ms. Gorod. Not in any specifics, no.
    Mr. Zeldin. What was the conversation in generalities then 
with regards to your testimony today?
    Ms. Gorod. I am not sure I understand the question.
    Mr. Zeldin. Okay. My question is, did you consult with the 
ranking member, or other Members who are your clients, or any 
of their staff regarding your testimony today?
    Ms. Gorod. They knew that I was giving testimony.
    Mr. Zeldin. Okay. But did you have--what were those 
consultations with regards to today's testimony?
    Ms. Gorod. I don't think there were any specifically about 
the testimony.
    Chairwoman Wagner. Will the gentleman yield?
    Mr. Zeldin. Yes, Madam Chairwoman.
    Chairwoman Wagner. I thank the gentleman for yielding.
    Ms. Gorod, what is the role of government?
    Ms. Gorod. The role of government?
    Chairwoman Wagner. Yes. A simple question. What is the role 
of government?
    Ms. Gorod. There are many roles of government. They include 
enacting laws to protect people and their individual liberties. 
It includes passing laws to prevent crime and to enforce those 
laws. I think it is not quite a simple question.
    Chairwoman Wagner. The role of government, Ms. Gorod, is to 
protect and preserve the individual rights and freedoms of the 
people, as laid out in our Constitution, liberties that are 
endowed by our Creator.
    I yield back to the gentleman.
    Mr. Zeldin. Thank you, Madam Chairwoman.
    Ms. Gorod, what are your thoughts on listening to the 
ranking member giving Mr. Olson a difficult time, saying that 
there is an unfair advantage for his client, given the fact 
that you are also representing individuals in the PHH case?
    Ms. Gorod. I think there is a significant difference 
between a party in litigation and amici, and I understand the 
ranking member's concerns. I said my significant concern is 
with the substance of the testimony that has been given because 
I think it is inconsistent with the Constitution and with 
Supreme Court precedent.
    Mr. Zeldin. Yes. I think it is incredibly hypocritical on 
the part of the ranking member to be giving Mr. Olson a hard 
time and alleging that his client is going to be given an 
unfair advantage while you are also representing individuals in 
the PHH case. You are invited here to testify at this 
particular hearing. You appear on behalf of current and former 
ranking members in the PHH case, including Members who were 
here at this committee.
    I yield back.
    Chairwoman Wagner. The gentleman yields back.
    This concludes our--
    Mr. Green. May I submit something for the record, with 
unanimous consent, Madam Chair?
    Chairwoman Wagner. Yes, without objection, it is so 
ordered.
    Mr. Green. All right. I would like to place in the record 
an amicus brief that is in support of the rehearing en banc; a 
statement from Americans for Financial Reform; a letter that is 
addressed to the Chair from the Center for American Progress. 
And indicate that the ranking member didn't ask for the 
hearing. The ranking member responded to those who asked for 
the hearing. The ranking member still disagrees with it.
    I yield back.
    Chairwoman Wagner. Without objection, those items will be 
placed in the record.
    Again, I would like to thank our witnesses for their 
testimony today.
    And, Mr. Olson, I want to thank you, since your former wife 
was referred to today by the ranking member for her sacrifice 
on September 11th and her untimely death, sir. It pains me 
greatly as a friend of hers and as an American citizen.
    I thank you all for your testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 11:59 a.m., the hearing was adjourned.]

                            A P P E N D I X



                             March 21, 2017
                             
                             
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